Two longtime friends created Beach Hut Deli. Lawsuits, police reports ended friendship

Three years ago, the Beach Hut Deli at Fresno State’s Campus Pointe opened with great expectations.

Sammy Franco and his wife, Rachel, brought a beach-like setting to the trendy spot — tables fashioned from surfboards and sandwiches with names like Beach Bikini, Surfin’ Pig and Righteous Reuben served on flying discs.

The new entrepreneurs believed they had a legitimate shot at success, mainly because they were partners with Terance Frazier, a longtime friend and a developer who has done major projects with the city of Fresno including Granite Park.

But the dream ended suddenly in October last year when the deli closed amid allegations of embezzlement, bank fraud and betrayal of trust.

The Francos and Frazier are now in a nasty legal battle that has led to two lawsuits in Fresno Superior Court and two police reports. They blame the other for the demise of the deli.

In January, Campus Pointe Commercial sued Frazier and the Francos for breach of contract, contending they owe more than $450,000 on their 10-year lease. This month, Frazier fired his own legal salvo, suing the Francos for breach of fiduciary duty and accusing them of taking the deli’s profits for their own personal use.

Frazier said he has filed a criminal complaint with the Fresno Police Department, accusing the Francos of stealing.

The Francos deny stealing from the till. They said Frazier killed the deli when he took nearly $165,000 from the business at a critical time when creditors were demanding payment for start-up costs. Sammy Franco said he begged Frazier to reinvest his money until the business could turn a profit, but Frazier declined.

“He pulled the rug from under us,” said Sammy Franco, 39, who has gone on social media, telling his audience that Frazier is a ruthless developer who put money over friendship. Franco said he, too, has filed a police report, accusing Frazier of embezzlement, extortion and conspiracy to commit bank fraud.

But Frazier said he was trying to help the Francos become financially independent. He said he loaned the Francos more than $200,000 and personally guaranteed payment on the 10-year lease, but the Francos squandered the deal.

“Why would I want to kill Beach Hut when I had so much invested in it?” Frazier said.

Frazier said he took the nearly $165,000 from the business because the money was his in the first place. He said the only promise he made to the Francos was a loan of $50,000. The Francos still owe him $40,000, he said.

“I was trying to help Sammy,” Frazier said. “Now he’s trying to screw me.”

Like family

Frazier, 49, is well known at City Hall because he has taken up the challenge to rebuild city-owned Granite Park in east-central Fresno and Al Radka Park in southeast Fresno. He also has plans to develop a major residential and commercial complex south of Chukchansi Park. Beach Hut Deli was among his many other investments and did not involve City Hall.

In the Beach Hut dispute, Frazier and his attorney, Russell Cook of Fresno, contend Frazier was just an investor and had no legal obligation to pay the debts that the Francos incurred. They also questioned how the deli failed since it grossed $828,788 in 2016.

“Sammy killed Beach Hut,” Cook said.

Sammy Franco agreed the deli grossed that amount, but said the business was operating in the red because of an estimated $500,000 in start-up costs on top of general costs including lease and payroll. If Frazier hadn’t taken his money out at a critical time, Franco said, the deli would have started turning a profit by the end of 2018.

“Don’t let Frazier fool you,” Franco said. “He knows what he did.”

According to documents Franco provided to The Bee, the Francos and Frazier signed Articles for Organization for Slamwich Co., LLC, on June 1, 2013. The agreement says Frazier had 51 percent ownership and Sammy and Rachel Franco each had 24.5 percent. In an interview, Frazier said he wanted majority ownership to ensure the Francos repaid him.

The breakup has been difficult, both sides said, because the Franco family has known Frazier for nearly 30 years. “I looked up to him and respected him,” Sammy Franco said. “He was like a big brother to me.”

In an interview, Frazier described Franco as his nephew and said his family are “good people.” Though Frazier said Sammy Franco has smeared his reputation on social media, he said he would not denigrate the Franco family.

A native of Oakland, Frazier was playing baseball for Fresno State in the 1990s when he started coming over to the Franco home in Fresno to eat and relax, said Sammy’s mother, Idalia Franco, 65. “He was family to us,” she said. “I considered him my adopted son. He was polite and always called before he came over.”

The friendship became closer when Frazier had a child with one of Idalia Franco’s nieces, but never married her, she said.

In this photograph from the 1990s, Terance Frazier, center, dines with the Franco family at their home in Fresno. Special to The Bee

Idalia Franco said her family helped Frazier when he was a struggling college student. Once he became successful, Frazier helped her family, she said, loaning them $4,000 to purchase a truck when their car got demolished in a head-on collision. He also treated them to lunch and gave them rides in a limousine and in his Bentley.

Idalia Franco said she was happy to hear that Frazier was going into business with her son, Sammy. But Idalia Franco said that since the deli closed, she feels Frazier has betrayed her family’s trust in him. “He seldom comes around and when he does he doesn’t look me in the eye,” she said. “I think he’s ashamed of what he did.”

Idalia Franco said she has forgiven Frazier but will never forget what he did to her family. “This whole thing just breaks my heart,” she said.

Acknowledging the hurt feelings, Frazier said: “It is always unfortunate for all those involved when a business fails. I wish Sammy and his family the best in their future endeavors.”

Paths to success

Frazier grew up without a father and left his Oakland home when he was a teen. He has credited a friend’s family for turning his life around.

His life at Fresno State was bumpy, too. He played at Fresno State, transferred to New Mexico, and then returned to Fresno State for his senior year.

“I try to be positive,” Frazier said after coming back to Fresno State. “I’ve got a lot of faith in the Lord, and I try not to get down. What happens, happens. That’s destiny. I can’t dwell on the bad things. I think I’m living a pretty good life.”

In 1992, the Oakland A’s drafted Frazier, a third baseman, in the 24th round, but his dreams of playing in the major leagues never panned out. According to the San Francisco Examiner, Frazier signed up as a replacement player during the 1995 strike season. He told a reporter he was willing to cross the picket line because he needed the money.

Frazier retired after the 1995 season after four years in the minors. But he had made enough money in baseball to start investing into properties in Fresno and elsewhere.

According to a Fresno State new release, Frazier’s residential and commercial real estate holdings spread from Fresno to Texas to Georgia in 2008 when he made a $100,000 donation to the Bulldog Foundation to support athletics.

“I invest in people, “ Frazier said at the time of his donation.

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Developer Terance Frazier in his Broadway Event Center, located just south of Chukchansi Park, on Tuesday, Dec. 5, 2017. CRAIG KOHLRUSS Fresno Bee File Photo

Around this time, Sammy Franco was making a name in the local restaurant scene. In 2010, he was one of several managers who opened Buffalo Wild Wings Grill & Bar on Shaw Avenue, across from Fresno State. Before that, he had worked for Red Robin, Red Lobster and Jamba Juice. (He now works for Chili’s at Herndon Avenue and Fresno Street in northeast Fresno.)

Franco said he always wanted to own a business. He said Frazier told him that if he ever came across a good venture to tell him. In December 2012, Franco told Frazier his idea through a Facebook message: ”Hey T, if you are looking for an investment you should look at Beach Hut deli. It’s a sandwich shop that serves beer. You should check it out. Would do great across from bww (Buffalo Wild Wings).”

Frazier wrote back on Facebook: “Would you like to partner with me? I’ll put up the money if you’ll run it. I love the idea.”

Terance Frazier (1990s)
In this photograph from the 1990s, Terance Frazier, wearing white shirt and gold necklace, attends a party at the Franco home in Fresno. Also pictured are Sammy Franco, right, his older brother, Jonathan, center, and their grandfather, Joe Bustos, left. Special to The Bee

Sammy Franco said Frazier, owner of TFS Investments, is “a smooth talker” who has the ability to get people to come together for a common cause. From the get-go, Franco said, “Terance called the shots.”

He said Frazier put up the initial $10,000 franchise fee and directed Franco to contact his attorney, David Emerzian of Fresno, to set up a limited liability company. In May 2013, Franco said Frazier told him for the first time that that he would have to get a $300,000 bank loan to support the Beach Hut Deli idea.

“I was kind of shocked because Terance told me he would put up all of the money,” Franco said.

Because Franco could not get a loan immediately, he said, Frazier, as part-owner, invested nearly $200,000 to keep the business on track.

In April 2014, Franco said Frazier directed him to a loan broker who could help him get a $300,000 loan. To get the loan, Franco said he had to put up his Clovis home as collateral and amended the Slamwich agreement.

According to Franco’s documents, an amendment on April 15, 2014, gave Sammy Franco 85 percent ownership and Terance 10 percent ownership. The Campus Pointe Beach Hut’s general manager received the remaining 5 percent.

After the loan was approved, an amendment on July 13, 2015, returned Frazier to his 51 percent ownership; Sammy Franco had 4 percent and Rachel Franco had 45 percent, Franco’s documents says.

Franco said the financing arrangement appeared fishy to him, but he never questioned Frazier. “I was new to this and I trusted Terance. I just figured this was how it was done,” Franco said.

Frazier, however, said Franco was solely responsible for the loan since he needed the money. Frazier provided emails to The Bee that he says support his claim. In a December 2014 email, Sammy Franco tells Frazier he is getting a loan. In a Feb. 3, 2015, email to Frazier, Franco say he agreed to adjust the ownership amounts “so that I can go for the loan myself.” In another email on March 11, 2015, Franco tells a bank official: “TFS has only been a lender.”

According to the Campus Pointe lawsuit, the Francos and Frazier signed a 10-year lease agreement in the fall of 2014; the lawsuit says Frazier personally guaranteed payment of the lease. Frazier said he did it because Campus Pointe wouldn’t give a lease to the Francos.

The $300,000 loan was a boost, Franco said, because the partnership paid $3,510 a month for the 1,800-square-foot shop plus about $1,000 a month in maintenance fees. Before the deli opened, Franco said he had to get a liquor license and insurance, purchase table, chairs, food and equipment, and hire staff.

Franco said that when the the deli opened in June 2015, it was short of operating capital. He said Frazier told him he could borrow $100,000 from one of Frazier’s friends.

But once Franco obtained the $100,000 loan in July 2015, Frazier took all of it. “Terance told me he needed the money to pay off investors,” Franco said. “I was kind of shock because it was the first time he told us he had investors. I had always thought he was using his own money.”

In the interview, Frazier said the $100,000 belonged to him. “Sammy was bleeding me dry,” said Frazier, who gave this analogy: If you loan money to a relative, you likely won’t get it back.

By taking the $100,000, Frazier said it would obligate Franco to make a conscientious effort to repay the loan.

Franco said he was upset with Frazier because Beach Hut needed $100,000. But Franco said he still trusted Frazier because of their longtime friendship.

Beach Hut Deli.jpg
In June 2015, the Beach Hut Deli at Fresno State's Campus Pointe opened to much fanfare because of its unique surfing theme. By November 2017, financial troubles doomed the business, forcing it to close. BEE FILE PHOTO

Franco said the Beach Hut grossed about $500,000 from June to December 31, 2015, largely because Frazier convinced him to get a license to sell alcohol in addition to beer. But the deli was still operating in the red because of unpaid bills and payroll obligations. He said he asked Frazier if he could reinvest part of the $100,00, but “Terance told me he was broke.”

Franco said the deli got another boost in January 2016 when Campus Pointe refunded $64,000 for the improvements it made. But Franco said Frazier took that money, too. “Terance told me he had to pay investors or he would go to jail,” Franco said. Frazier said he took the $64,000 because he still wanted to recoup his initial $200,000 investment. He called Franco’s comments about going to jail ridiculous because he said he has plenty of money from his real estate investments.

Though Beach Hut grossed $828,788 in 2016, Franco said he had to take out high-interest loans totaling about $45,000 to pay bills and employees. Franco said he tried to consolidate his loans at a lower interest rate, but he said Frazier was not willing to sign any loan agreements, even though he was the majority owner.

Franco said in September 2016 the bank that loaned him $300,000 demanded that the Slamwich agreement reflect Franco having 85 percent ownership or he would be in default. Franco recalled Frazier getting mad at him. “He told me I had screwed him because nobody was suppose to know about the amendments,” Franco said.

As months passed, Franco said, Frazier kept telling him he wanted his name off Slamwich because the deli was hurting his credit and tax returns. Franco said he thought it was a great idea to get rid of Frazier as a partner, but Frazier declined to sign any papers.

Franco said that by the time the Beach Hut closed in late October, his family was deep in debt. He said he ended up losing his home in Clovis. “It would have worked, but Terance took the money right when we were about to turn the corner,” Franco said.

But Frazier said he never had keys to the business or access to the deli’s till. His lawsuit says the Francos never deposited the deli’s final two months of profits into the bank and didn’t pay their employees their last paychecks. The Francos used business profits to rent a car and hotel room in Monterey in November, the lawsuit says.

On Wednesday, Aug. 18, 2018, Sammy Franco visits his old Clovis neighborhood near Barstow and Willow avenues. He and his wife, Rachel, and their two children had lived in the home, pictured here, since 2007 before losing it this year due to a foreclosure. The Francos, former owners of the Beach Hut Deli at Fresno State’s Campus Pointe, blame their longtime friend, Fresno developer Terance Frazier, for their financial troubles. PABLO LOPEZ

“Where did the money go?” Frazier asked.

During a deposition this month, Sammy Franco pleaded the Fifth Amendment against self-incrimination when Cook asked him if he had used cash from the deli for personal expenses. “At this time, I don’t feel comfortable answering any of your questions without an attorney,” Franco said.

In an interview, Sammy Franco said he took the Fifth because he felt Cook was trying to trick him. He said his deposition will show that he used the deli’s final tab to pay bills and debts to his family, friends and other creditors. “I have the receipts to prove it,” he said.

Franco also said he and his wife had to rent a car because their car was repossessed. He said they drove to Monterey to reassess their lives.

“Terance really hurt us,” Sammy Franco said. “He was suppose to be my mentor and show me the ropes. Instead, he burned me.”

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